The income statement for Huerra Company for last year is provided below:

Total UnitSales$44,400,000 $444.00Less: Variable expenses 35,520,000 355.20Contribution margin 8,880,000 88.80Less: Fixed expense 4,440,000 44.40Net operating income 4,440,000 44.40Less: Income taxes @ 30% 1,332,000 13.32Net income$3,108,000 $31.08

The company had average operating assets of $12,000,000 during the year

Required:

1. Compute the companys ROI for the period using the ROI formula stated in terms of margin and turnover. (Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

ROI = _____ %

2. Consider each of the following questions separately and then compute the new ROI figure. Indicate whether the ROI will increase, decrease, or remain unchanged as a result of the events described.

a. By using JIT, the company is able to reduce the average level of inventory by $400,000. (The released funds are used to pay off short-term creditors.) (Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

ROI = _____ % increase

b. The company achieves a savings of $22 per unit by using cheaper materials. (Round intermediate and final answer to 2 decimal places.)

ROI = _____ % increase

c. The company issues bonds and uses the proceeds to purchase machinery and equipment, thus increasing the average assets by $400,000. Interest on the bonds is $40,000 per year. Sales remain unchanged. The new, more efficient equipment reduces fixed production costs by $20,000 per year. (Round intermediate and final answer to 2 decimal places.)

ROI = _____ % decrease

d. As a result of a more intense effort by the sales staff, sales are increased by 15%; operating assets remain unchanged. (Round intermediate and final answer to 2 decimal places.)

ROI = _____ % increase

e. Obsolete items of inventory carried on the records at a cost of $110,000 are scrapped and sold for 25% of the book value. (Use full amount of scrap while calculating average operating assets. Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

ROI = _____ % decrease

f. The company uses $200,000 in cash (received on accounts receivable) to repurchase and retire some of its common shares. The net effect of this transaction is a $200,000 change in average operating assets. (Use full amount of scrap while calculating average operating assets. Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

ROI = _____ % increase

g. The company pays a cash dividend to its shareholders, which results in a $300,000 change in average operating assets.(Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

ROI = _____ % increase